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Partners. “Telehealth has become a bigger part of healthcare. It’s cost effective, you can quickly get on a video call, and you’re not surrounded by sick people.”

Marty Allen, CEO and co-founder of consultancy Real Solutions Group, believes large chains will move further into these areas “if they haven’t already.” He added, “Without COVID, we wouldn’t have advances in telepharmacy.”

Profitability and reimbursement

In states where certain services are permitted, profitability and reimbursement can be challenging. With drug margins often slim, pharmacies need the revenue services can provide. In 2022, just four states passed bills addressing reimbursement.

“Pharmacies often make pennies on every prescription dispensed,” said Mike McBride, VP partner relations, Upsher-Smith Laboratories. “Reimbursement rates are often barely sufficient to cover drugs’ cost. Margins frequently have been squeezed out of reimbursements. While it’s difficult to measure margins on services, whatever they’d [pharmacists] get paid in return would be considered upside margin. Physicians have been reimbursed based on time invested and insurance codes.”

Groves believes medications and pharmacy services should be separated when it comes to reimbursement.

“For years, services haven’t been reimbursed at the same rate or any rate at all,” she added. “It’s important that patient services be separated from the product.”

Further stressing profits—and driving up costs—are pharmacy benefit managers (PBMs). Three (CVS/Caremark, OptumRx and Express Scripts) control 85% of the market. This near-monopoly allows these “middlemen” to secure large discounts from drug manufacturers.

“They’re taking from both sides, including employers paying for services,” said Ed McKinley, founding partner, Pharmacy Management Consultants. “They’re always figuring out ways to drive up out-ofpocket costs with copayments and deductibles. Initially, PBMs were intended to drive down costs. There’s much to unpack when it comes to [retail pharmacies] negotiating with them. When you look at some of the vertical relationships like those of CVS Health, they have advantages compared to other retailers.”

Rona Hauser, SVP policy and pharmacy affairs, NCPA, cited “patient steering” by PBMs whose parent companies own pharmacies. “PBMs add dollars to health care. We continue wanting government to take a hard look at vertical integration and what it’s doing to consumers and providers,” he said. “We’re happy with the work the FTC is doing here. And many members of Congress are interested in tackling it.”

Also compromising profits are direct and indirect remuneration (DIR) fees. DIRs result from a loophole in Medicare regulations. Often, more than 18 months after a pharmacy fills a Medicare prescription, payers retract money paid to pharmacies. Payers claim they are taking back money due to a pharmacy’s performance on unknown “quality” issues. The federal Centers for Medicare & Medicaid Services said DIR fees increased 107,400% from 2010 and 2020. IQVIA estimates that between December 2017 and December 2020, almost 2,200 pharmacies closed nationwide due to “surprise bills.”

The Biden Administration’s Centers for Medicare & Medicaid Services (CMS) finalized a new rule in April 2022 titled, Medicare Program; Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs. Provisions affect DIR fees and will take effect in January 2024.

In a written statement, NACDS president and CEO Steven Anderson said the rule is not comprehensive enough. “Much work remains to be done,” he said. “The 2022 rule did not eliminate pharmacy DIR clawbacks that plan sponsors and PBMs impose on pharmacies, nor did it eliminate sponsors’ and PBMs’ incentives to continue doing so. PBMs have exploited DIR to create a loophole in the Medicare regulation. In the Part D bidding process, sponsors and PBMs may continue to underestimate DIR fees and over-collect.”

Regardless of the issue, changing the pharmacy model on a large scale is challenging, particularly when it involves discussions with insurance companies, legislators and other influencers. But experts are optimistic. “We’re flipping the pharmacy model on its head,” said Fish. “For years, we’ve relied on product dispensing. Pharmacies will always be tied to medication services. But we’re now looking at the whole model. The ideal future pharmacy will emphasize services as part of the statement rather than everything being tied to product. That’s where the transition is going.” dsn